HC's 50% assets threshold for indirect transfers - Setting controversy at rest?
The recent Delhi High Court judgment, setting a 50% Indian assets threshold for invoking taxability on offshore sale, is significant on many counts, not least for bring a semblance of clarity in an otherwise grey zone. Sec 9(1)(i) of the Act read with Explanation 5, introduced by Finance Act, 2012, sought to overrule the Apex Court judgment in Vodafone, by bringing indirect transers into the tax net if 'substantial' assets are located in India. But while doing so, the Legislature left the term "substantially", undefined.
Has the Delhi HC put an end to the controversy over indirect transfers taxation, especially the definition of the term 'substantially'? Will it end the confusion on how to define the term 'substantially, or are there still some unanswered questions'? Is the HC right in taking the aid of Shome Committee report, OECD & UN Model conventions to set a 50% assets threshold? Is it high time for CBDT to come up with a clarification or should the Revenue let the matter rest by accepting the High Court interpretation?